The Business of Software

Cusumano, a professor at MIT's Sloan School of Management and coauthor of Microsoft Secrets, offers a comprehensive overview of the software business and how the right approach is key to the success of technology companies. Cusumano first identifies the key distinction between software and other businesses. In fact, he believes it is unlike every other business because software doesn't have one purpose but becomes whatever function it is handling for a particular customer or company. As a result, software companies must sell both products and services, according to the author. The two typical ways software companies operate is by getting the lion's share of revenues from new product sales or via IT consulting. The third way is what the author calls "hybrid solutions companies—software firms that have some new product sales, but derive as much as 80% of their revenues from services and "maintenance." However, what's essential for company success in today's rapidly changing technological marketplace is having sufficient flexibility to change to meet customer needs. Citing both real companies including IBM, Netscape, etc., along with academic studies, Cusumano describes the changing face of the software industry over the past two decades. The writing is coherent and, given the somewhat technical subject matter, surprisingly graspable even for technophobes. Still, this is a niche book, apt to appeal to people involved in the world of software, rather than a general business audience. 
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Michael A. Cusumano is the Sloan Management Review Distinguished Professor at the MIT Sloan School of Management and one of the world's leading authorities on software development and the management of software companies. He is the author or coauthor of seven other books, including the bestsellers Microsoft Secrets and Competing on Internet Time, as well as Japan's Software Factories and most recently Platform Leadership.